VSCode does not inherit command prompt environment variables when launched using code.exe

[Primer81]

Does this issue occur when all extensions are disabled?: Yes

• VS Code Version: 1.97.0 insiders
• OS Version: Windows 10 (build 19045)

Steps to Reproduce:

1. Open command prompt and launch vscode with the following commands:

set PATH=C:\msys64\mingw64\bin
start /d "C:\path\to\vscode\install\directory\" Code.exe -n

2. In the VSCode instance, open a Command Prompt terminal and execute echo %PATH%
3. Open a new command prompt window and launch vscode with the following commands:

set PATH=C:\msys64\ucrt64\bin
start /d "C:\path\to\vscode\install\directory\" Code.exe -n

4. In the new VSCode instance, open a Command Prompt terminal and execute echo %PATH%

Expected behavior: The second instance of VSCode will echo C:\msys64\ucrt64\bin.
Actual behavior: The second instance of VSCode echos C:\msys64\mingw64\bin.

Related to the following closed issues: #15452 #109238. After reviewing these issues, I do believe this is a bug and not the intended design. I wasn't able to find any open issues regarding this topic.

I also read the loosely related open feature-request #47816, but it doesn't capture this issue specifically since it is talking about updating the environment for new terminal instances within an already open instance of VSCode.